Wells Fargo said Wednesday that it has agreed to participate in the administration’s Second Lien Modification Program (2MP).
The San Francisco-based bank is only the second major servicer to sign on to the junior lien component of the Home Affordable Modification Program (HAMP), since it was introduced nearly a year ago. The first was Bank of America back in January.
Together these two companies own about a quarter of the nation’s $1 trillion second lien mortgage market. Based on their most recent financial filings, Wells Fargo holds $115 billion in junior liens and BofA has $149 billion.
Lowering a homeowner’s monthly mortgage obligation within their payment capabilities can sometimes be hampered when there is also a second home equity mortgage hanging in the balance, pushing the borrower further underwater in the wake of falling home prices. In such situations, finding a truly workable debt restructuring requires cooperation from both the first and second lien holders. The Treasury has estimated that up to 50 percent of at-risk mortgages also have second liens.
Servicers participating in 2MP are required to contact all first lien HAMP customers with second lien mortgages to make them aware of the new payment relief option. Under
2MP, when a borrower’s first lien is modified under HAMP and the servicer of the second lien is a 2MP participant, that servicer must offer either to modify the borrower’s second lien according to a defined protocol or to accept a lump sum payment from Treasury in exchange for fully extinguishing of the second lien.
“The Second Lien Modification Program offers struggling homeowners with yet another valuable option for reducing payments so they can remain in their homes,” said Kevin Moss, EVP of Wells Fargo’s Home Equity Group. “This program is an important component of joint industry and government efforts to bring further stability to the housing market.”
Wells Fargo has already implemented a number of programs on its own to assist home equity customers. The company’s Home Equity Group regularly participates in home preservation events in local markets across the country to help customers resolve their payment challenges. Wells also has a proactive borrower outreach program in place, and has added more than 2,000 team members who are focused on home equity customers who are struggling to meet their obligations.
As a result of all of these efforts, as of the end of February 2010, Wells Fargo provided assistance to more than 180,000 second lien mortgage customers through various programs, including loan modifications and subordinations.
“This new program will help expedite our efforts and likely increase the number of borrowers we can assist through loan modifications, which will benefit our customers, our communities and our shareholders,” Moss said.
Earlier this month, House Financial Services Committee Chairman Barney Frank sent a personal letter to Wells Fargo, as well as Bank of America, JPMorgan Chase, and Citigroup, urging all four to “take immediate steps to write down second mortgages” to create a clear path for sustainable loan restructurings.
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